South Korean investors beset by Asia’s third-lowest benchmark yields are embracing peer-to-peer loans that offer average rates of about 9 percent and not a lot of information about where the money winds up.

The nascent online P2P lending market more than doubled to 72.4 billion won ($63.7 million) in the first three months of 2016, Korea’s Financial Services Commission reported on July 12. Cumulatively, P2P loans made since 8Percent became the first platform in December 2014 totaled 153 billion won as of June, the Korea P2P Finance Association of 22 companies estimates.

The expansion is being stoked by South Koreans’ desperation for returns, with the yield for 10-year government bonds slumping to 1.42 percent last week. That’s lower than every Asian nation apart from Taiwan and Japan. The rapid growth has added to urgency for Korea’s government to protect investors from potential fraud, and the Financial Services Commission held a meeting Friday to start drafting industry guidelines. China cracked down last year after a site called ­Ezubao was alleged to have cheated 900,000 investors.

“You must watch out because many P2P businesses don’t clearly disclose where the investment money goes,” said Park Tae-woo, a credit analyst at Samsung Securities.

Higher Rates

P2P lenders such as 8Percent, Funda and Midrate directly match lenders with individuals or businesses in need of money. The industry generally offers average rates of about 9 percent to 10 percent, according to the firm 8Percent. The Bank of Korea on July 14 held its benchmark interest rate at a record low 1.25 percent.

Funda and Midrate haven’t been accused of any wrongdoing, according to officials at the companies.

There have been few signs of problems between Korea’s P2P lenders and regulators, though 8Percent’s website was closed for a month in February by the Korea Communications Commission. That came at the request of the Financial Supervisory Service after 8Percent did business without registering as a private lender, according to a public relations official at the firm. After that, 8Percent registered as an e-commerce platform and now owns a subsidiary registered as a private lender, the person said.

Polarized Market

“Investors’ money has nowhere to go in this era of low interest rates,” said Lee Hyo-jin, chief executive officer of 8Percent, the first and largest P2P platform in Korea. The company’s accumulated investments grew almost nine-fold to 27 billion won in July from 3.4 billion won a year earlier.

Korea’s P2P market is dwarfed by China’s, which stood at about $87 billion in May, according to Bloomberg Intelligence.

“South Korea’s loan market is quite polarized as commercial banks offer rates lower than 5 percent while rates by private lenders exceed 20 percent,” said Park Sung-jun, the founder of Funda, which mainly targets individual proprietors. “We offer a new type of loan opportunity for those who could not borrow money from commercial banks because of the lack of collateral, or from private lenders because of high interest rates.”